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UNTIL 11/11/2014
THE POWER OF
ENTREPRENEUR
NETWORKS
How New York City Became the
Role Model for Other Urban Tech
Hubs in Just Ten Years
a report from:
2/How New York City Became the Role Model for Other Urban Tech Hubs
EXECUTIVE SUMMARY
OVER THE LAST YEAR, our team at Endeavor
Insight studied the rapid growth of New York
Citys information technology industry. We
define tech companies as those developing
an information technology or those whose
businesses are Internet-enabled, excluding
financial tech, green tech, and life sciences
companies.1 Our goal was to identify lessons
that leaders in other cities can use to support
the growth of their own tech sectors. In the
process, we created one of the largest datasets on a single entrepreneurship ecosystem
in the world. It combines data from AngelList,
Crunchbase, and LinkedIn with nearly 700
interviews with local tech entrepreneurs. In
total, these founders dedicated more than a
month of their time to this project. Our analysis reveals three key findings:
How New York City Became the Role Model for Other Urban Tech Hubs
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4/How New York City Became the Role Model for Other Urban Tech Hubs
AT $1.1 BILLION, the sale of DoubleClick in 2005 kicked off a decade of rapid
growth for the New York City tech sector.
Since then, companies like Buddy Media
and Right Media have followed closely in
DoubleClicks footsteps, selling for hundreds of millions of dollars.
THE FASTEST GROWING URBAN
TECH HUB. New York Citys tech sector
creates hundreds of new startups annually. These arent just small businesses, but
ones that are scaling rapidly in preparation
for IPOs and acquisitions, with at least 27
companies exiting for more than $500
million in the last decade.6 The sector has
expanded so rapidly that the growth of
invested venture capital dollars, at 13.3%
annually between 2003 and 2013, is twice
as large as that of Silicon Valley, at 6.4%,
and dwarfs that of Massachusetts, at negative 1.7%.7 New York Citys tech sector has
superseded even Bostons by many measures to become the largest standalone
urban tech hub in the United States.8
POISED FOR GREATER GROWTH.
Between 2010 and 2013, the number
of New York City tech employees grew
by more than 26% annually.9 At this rate,
based on 2013 tax rates and a $100,000
average salary, the city could add nearly
$160 million annually in new tech employee income tax receipts by 2019 and over
$500 million by 2024.10 Assuming each of
these new employees uses 100 square feet
of office space, tech companies would
need almost 450,000 square feet of additional office space annually by 2019 and
1.4 million square feet by 2024 to accommodate them, providing real benefit to
industries beyond the tech sector.
How New York City Became the Role Model for Other Urban Tech Hubs
/5
20032013
2,206
336
Companies founded
53,000+
Jobs
$14.2Bn
Investment
$18.1Bn
Exit amount
6/How New York City Became the Role Model for Other Urban Tech Hubs
Number of founders
AVG. = 31 YEARS
400
300
200
100
0
1721
2226
2731
3237
3842
4347
4852
5356
57+
How New York City Became the Role Model for Other Urban Tech Hubs
/7
8/How New York City Became the Role Model for Other Urban Tech Hubs
.
60%
Philosophy
Marketing
History
Business
Political Science
Finance
40%
Economics
Percent of founders.
Mathematics
Engineering
Electrical Engineering
Computer Science
20%
Other Non-STEM
Other STEM
0%
Non-STEM majors
Note: 1,681 founders studied 2,499 majors in undergraduate.
STEM majors
How New York City Became the Role Model for Other Urban Tech Hubs
MS
23%
MBA
43%
PhD
5%
/9
JD
7%
MA
14%
Other
8%
10/How New York City Became the Role Model for Other Urban Tech Hubs
Media, and AppNexus have gone on to influence 177 other companies themselves, which
in turn have influenced 227 companies.19 Within just three degrees of influence, these three
companies alone touch over 400 New York
City tech firms.20
As New York City tech companies become
more successful, their founders are more
likely to connect to and influence other entrepreneurs. Although the vast majority of New
York City tech companies are still private, it is
possible to look at the over 300 companies
with recorded exits between 2003 and 2013
to determine how influential their entrepreneurs became after being acquired. For every
100% increase in the dollar value of an exit,
that company and its founders become 25%
more influential.21 After selling their companies, founders and employees combine new
wealth with the experience of having built a
fast-growing company. With this expertise,
capital, and visibility, these entrepreneurs
found new companies, accelerate the growth
of existing ones, and contribute to the ongoing
expansion of the sector.
SUCCESS PASSES FROM ONE GENERATION TO THE NEXT. The most successful
companies have an important impact on the
performance of the entrepreneurs they influence. To explore this, we look at companies
that are top performers, as defined by being in
the top 10 percent of all companies founded in
the same year by number of employees, total
investment, or exit amount between 2003 and
2013.22 Companies that have been influenced
by these top-performers become top-performers themselves 22% of the time, almost
three times as often as those that do not have
How New York City Became the Role Model for Other Urban Tech Hubs
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25%
20%
22%
15%
10%
8%
5%
0%
12/How New York City Became the Role Model for Other Urban Tech Hubs
How New York City Became the Role Model for Other Urban Tech Hubs
Mentorship
Inspiration
SUNRISE
FELT TIP
DIMENSIONU
OUTSIDE.IN
FASHISM
/13
YOUARE.TV
SWAAG
MONTAJ
HAVE TO HAVE
BLUEFLY
SHOPTIQUES
SOCIOCAST
SINGLE
PLATFORM
DIET TV
POPPIN
STYLECASTER
New York City tech companies.33 The multiplicative effect of these two types of connections alone is impressive: on average, every
two New York City tech companies connected
to this network give rise to one more through
serial entrepreneurship and former employee
spinouts.34
14/How New York City Became the Role Model for Other Urban Tech Hubs
How New York City Became the Role Model for Other Urban Tech Hubs
/15
336
1,503
1,500
428
1,070
1,000
719
865
535
500
359
236
87
45
320
148
Mentorship
Investment
Former employees
Serial entrepreneurship
Note: 24.6% connections CAGR, 20102013, 2,070 total connections, 20032013.
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
04
20
03
20
Inspiration
13
121
0
20
Number of connections
2,000
16/How New York City Became the Role Model for Other Urban Tech Hubs
DoubleClick
Legend:
MENTORSHIP
INSPIRATION
INVESTMENT
First degree: 44
FORMER EMPLOYEE
FOUNDER
WHEN HOUSEHOLDS in the U.S. were just getting their first dial-up Internet connections, Kevin OConnor, Dwight Merriman,
and Kevin Ryan mixed technology and advertising to monetize
the consumer Internet. DoubleClick became a leading Internet
ad-server and rode the expanding Internet bubble to an IPO in
1998. When the bubble burst and decimated the tech industry,
DoubleClick managed to survive, losing 70% of its clients but
80% of its competitors. 36 As the industry slowly regained its
footing, DoubleClick and its founding team managed to resize
the company and achieve profitability before selling it to pri-
How New York City Became the Role Model for Other Urban Tech Hubs
/17
Buddy Media
Legend:
MENTORSHIP
INSPIRATION
INVESTMENT
First degree: 16
FORMER EMPLOYEE
Second degree: 43
FOUNDER
million in investments from blue chip investors including Greycroft, Softbank, and British advertising giant WPP.40 In 2012,
Salesforce.com, seeing the strength of Buddy Medias managing team and the staying power of its product, acquired the
company for more than $800 million. The story doesnt stop
there. The four founders have become influential investors and
mentors to younger entrepreneurs. They have made at least 11
angel investments in New York City tech companies and have
continued to mentor and inspire several other entrepreneurs.
18/How New York City Became the Role Model for Other Urban Tech Hubs
AppNexus
Legend:
MENTORSHIP
INSPIRATION
INVESTMENT
First degree: 20
FORMER EMPLOYEE
Second degree: 66
FOUNDER
WHEN RIGHT MEDIA, which was founded by a former DoubleClick employee, sold to Yahoo! for $850 million, two of its former employees had an idea for a new kind of digital advertising
company. Brian OKelley and Mike Nolet founded AppNexus
to transform digital advertising by offering real time bidding
to compete with some of the biggest names in the business:
Google, Yahoo!, and Facebook. In just five years, the company
has grown to be one of the largest ad exchanges in the world,
second only to its homegrown competitor, Googles DoubleClick. AppNexus $130 million in revenues and 500 employees
at the end of 2013 helped it to raise $140 million at a valuation
How New York City Became the Role Model for Other Urban Tech Hubs
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2003
45 total connections
2006
2009
2004
87 total connections
2007
2010
2005
2008
2011
Total connections
among entrepreneurs
in 2013
2012
2013
20/How New York City Became the Role Model for Other Urban Tech Hubs
subways. A separate program, now called digital.nyc, is a platform for all things tech in the
city. Its news stories promote local companies
and emerging technologies and celebrate the
growth of the sector with a map of local tech
companies, investors, jobs, and events.
Cities can promote their success stories
without building a dedicated online platform
or launching a large-scale advertising campaign. In Texas, The Dallas 100 is an annual
list of the fastest-growing companies in the
city. Over 1,100 executives, investors, university
leaders, government officials, and journalists
celebrate and promote the companies on the
list during an annual award celebration, creating examples of inspirational high-growth
entrepreneurs in the process.
How New York City Became the Role Model for Other Urban Tech Hubs
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Methodology.
companies in the dataset were founded after 1996 due to survivorship bias. 44 We then
identified and vetted 4,542 entrepreneurs and
found that 4,161 had founded one or more of
these New York City tech companies.
We interviewed 645 New York City tech
founders representing 665 New York City tech
companies and asked them five core questions:
Who inspired you to become an entrepreneur?
Who invested in your company?
Who was your mentor during the growth
and development of your company?
Have you founded other New York City
tech companies?
Which of your former employees have
gone on to found New York City tech
companies?
We use the responses to these questions
to create an edgelist of connections among
companies, along with a corresponding set
of five outbound connection types, each of
which is represented by a different colored
arrow. 45
Where an entrepreneur has founded multiple companies, his or her most prominent
company based on an index of founding date,
number of employees, total investment, and
exit sizes represents his or her influence on the
map.
Companies are oftentimes connected by
more than one type of connection. Where
a purple founder arrow connects any two
companies, the only other arrow that can
appear is the blue former employee arrow.
Likewise, where mentorship and investment
occur simultaneously between two compa-
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24/How New York City Became the Role Model for Other Urban Tech Hubs
APPENDIX 1
Interviewees
LISTED BELOW are all 645 entrepreneurs who participated in interviews. We list entrepreneurs
based on the rank of their most influential company. Ranks are listed in parentheses, and companies with no outbound connections are listed in alphabetical order.
DoubleClick (1): Dwight Merriman, Kevin Ryan
Right Media (3): Jonah Goodhart
Group Commerce (4): Jonty Kelt, David Rosenblatt
Hunch (5): Caterina Fake
iVillage (6): Robert Levitan
AppNexus (10): Brian OKelley
PulsePoint (11): Matt Keiser
Olo (12): Noah Glass
Mimeo (13): John Delbridge, David Uyttendaele, Jeff Stewart
Buddy Media (14): Michael Lazerow
Tracks (15): Daniel Klaus
Dstillery (17): Joe Doran, Kathy Leake, David Honig
Dimestore Media (19): Doug McFarland
Pando Networks (21): Laird Popkin
Invite Media (23): Scott Becker, Nat Turner, Michael Provenzano
LocalResponse (25): Nihal Mehta, Michael Muse
LivePerson (29): Robert Locascio
Lendkey (33): Vince Passione
Mojiva (35): Miles Spencer
Adaptiveblue (37): Alex Iskold
Axial Market (40): Peter Lehrman
Quigo Technologies (42): Yaron Galai
Olx (43): Fabrice Grinda
Interclick (44): Michael Katz
Big Fuel (45): Avi Savar
Healthination (47): Tony Estrella
Bonobos (48): Andy Dunn
Noodle Education (49): John Katzman
Warby Parker (52): David Gilboa
Collective (54): Joe Apprendi
33Across (55): Eric Wheeler
Admeld (56): Ben Barokas, Brian Adams
Yipit (58): Vinicius Vacanti
Floored (59): Dave Eisenberg
Totsy (60): Guillaume Gauthereau, Christophe Garnier
Site59 (62): Damon Tassone, Michelle Peluso, Josh Feuerstein,
Richard Harris
Hyperpublic (63): Doug Petkanics, Jordan Cooper
Spinback (64): Andrew Ferenci
Send The Trend (65): Divya Gugnani
Gilt Groupe (68): Michael Bryzek, Phong Nguyen, Alexis
Maybank
Behance (71): Scott Belsky
Linkshare (73): Stephen Messer, Heidi Messer
Vonage (75): Carlos Bhola
Mr. Youth (77): Matt Britton
Meetup (84): Greg Whalin, Scott Heiferman
Doodledeals (85): Caren Sinclair-Kay
Knewton (88): Jose Ferreira
Collective[i] (89): Tad Martin
Casahop (90): Florent Peyre, Paul Berry
Jibe (91): Joe Essenfeld
Nomi (93): Wesley Barrow
Irrive (98): Steven Cohn
Optimost (100): Mark Wachen
Lot18 (102): Philip James
Digital Railroad (104): Evan Nisselson
Keep Holdings (106): Maryann Bekkedahl, Scott Kurnit
Chatid (109): Dan Herman
Heavy (110): Simon Assaad, David Carson
Localvox (112): Trevor Sumner
Razorfish (113): Jeff Dachis, Craig Kanarick
Next Jump (115): Charlie Kim
Movable Ink (117): Vivek Sharma, Michael Nutt
Motionbox (124): Josh Grotstein
Crowdtwist (125): Irving Fain, Josh Bowen
Fotolog (128): Adam Seifer
Blog Talk Radio (131): Robert Charish
Thankster (135): Paul Geller
Outside.in (137): Cory Forsyth
Orchard (138): Kevin Kim, Art Chang
Tra (139): Bill Harvey, Mark Lieberman
AppCard (141): Yair Goldfinger
Cookstr (146): William Schwalbe
Next New Networks (150): Fred Seibert, Jed Simmons
Patentory (154): Fatih Ozluturk
[x+1] (157): Ted Shergalis
Internet Media Labs (159): Peter Bordes
Adheretech (160): Michael Morena
Offerpop (161): Prakash Mishra, Wendell Lansford
Theladders (164): Alexandre Douzet
Drop.io (167): Darshan Somashekar
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26/How New York City Became the Role Model for Other Urban Tech Hubs
APPENDIX 2
Acknowledgements
APPENDIX 3
Participants
The following investors and support organizations assisted in connecting us with founders:
Incubate NYC, 500 Startups, Projected Spaces,
Alley New York City, Consigliere, Socratic Labs,
Varick Street Incubator, Founders Institute, Tipping Point Partners, The Hatchery, and WeCreate NYC.
In addition to connecting us with their
portfolio companies, the following organizations also participated in roundtable discussions of preliminary findings in October and
November 2013: Bessemer Venture Partners,
DFJ Gotham Ventures, Flybridge, Founder Collective, Google Ventures, Greycroft Partners,
IA Ventures, Lerer Ventures, DreamIt Ventures,
Entrepreneurs Roundtable Accelerator, Fueled
Collective, Grind Spaces, IncubateNYC, Ingk
Labs, InSITE, NYC Seed, and NYC Seed Start.
How New York City Became the Role Model for Other Urban Tech Hubs
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ENDNOTES
1.
See Methodology section for additional information on the definition of New York Citys information technology sector.
2.
The New York Tech Scene Sees Almost $10 Billion Invested Across 2,206 Deals in Last Five Years. CB Insights. 30 July 2014,
accessed 5 November 2014 < https://www.cbinsights.com/blog/new-york-tech-investment-report/>.
3.
3.8 million people were employed in New York City in July 2014. New York City Local Area Unemployment Statistics
Program. New York State Department of Labor. Accessed 15 september 2014 <http://labor.ny.gov/stats/laus.asp>. We assume
that companies for which we do not have employment data (1,627 of 2,593) have the median number of employees (10), with
53,430 estimated net employees working at these New York City tech companies as of December 2013.
4.
CB Insights.
5.
2,206 companies were founded between 2003 and 2013 of 2,593 companies, all time, or 85.11%. 53,430 jobs were created
between 2003 and 2013 of 62,291 gross jobs, all time, or 85.77%.
6.
Nick Beim. The Rise and Future of the New York Startup Ecosystem. 28 February 2014, accessed 27 June 2014 <http://www.
nickbeim.com/the-rise-and-future-of-the-new-york-startup-ecosystem-2/>.
7.
Ibid.
8.
Richard Florida. New York City: The Nations Second Leading Tech Hub. 9 May 2012, accessed 27 June 2014 <http://www.
theatlanticcities.com/technology/2012/05/new-york-city-nations-second-leading-tech-hub/1969/>.
9.
In 2010, the New York City tech sector had 26,577 employees and in 2013, 53,430 employees, a 3-year compound annual
growth rate (CAGR) of 26.21%.
10. New York Citys Growing High-Tech Industry. April 2014, accessed 27 June 2014. <http://www.osc.state.ny.us/osdc/rpt22015.pdf>.; New York City tax rate schedule. New York State Department of Taxation and Finance. 2013, accessed 27 June
2014. <http://www.tax.ny.gov/pdf/current_forms/it/nyc_tax_rate_schedule.pdf>.; 2019 estimated taxes collected: 44,845
new tech employees*($1,706+(3.648%*$50,000)) = $158,302,850; 2024 estimated taxes collected: 143,608 new tech
employees*($1,706+(3.648%*$50,000)) = $506,936,240.
11. Rhett Morris. How Did Silicon Valley Become Silicon Valley: Three Surprising Lessons for Other Cities and Regions. Endeavor
Insight. July 2014.
12. 2003-2013 economic impact calculated using two methodologies. For companies founded, acquisitions, and exit amounts,
we count the actual number of companies founded and acquired and the actual dollar amount of exits between January
2003 and December 2013 based on survey and publicly available data. For employees and investment, we assume straight
line growth from the founded year until the close year, acquisition year, or 2013, recording only employees and investments
generated between 2003 and 2013. We assume that companies for which we do not have employment data (1,319 of 2,206)
have the median number of employees (10). All other figures are actuals.
13. 30.64 (+/-.34 years) on average when New York City tech founders found their companies. Assumes that founders are 18 at
undergraduate university matriculation.
14. 81.87% (+/-2.52%) of New York City tech founders attended high school in the five boroughs of New York City.
15. 11.67% (+/-1.44%) of New York City tech founders attended undergraduate school in the five boroughs of New York City.
27.84% (+/-2.91%) of New York City tech founders attended graduate school in the five boroughs of New York City.
16. 64.54% (+/-1.92%) of New York City tech founders studied at least one non-STEM subject in undergrad while 35.46% (+/-1.92%)
studied at least one STEM subject.
17. 41.98% (+/-2.21%) of New York City tech founders have a graduate degree, 64.40% of founders have non-technical graduate
degrees. 42.97% (+/-3.26%) have an MBA, 22.73% (+/-2.76%) have an MS, 14.29% (+/-2.30%) have an MA, 7.14% have JDs (+/1.69%), 5.30% (+/-1.47%) have PhDs.
18. DoubleClick has 44 first degree connections; AppNexus has 20 first degree connections; Buddy Media has 16 first degree
connections. Five of these connections overlap.
19. DoubleClick, AppNexus, and Buddy Media have 177 second degree connections and 227 third degree connections.
20. DoubleClick, AppNexus, and Buddy Media have 401 unique connections within three degrees.
28/How New York City Became the Role Model for Other Urban Tech Hubs
How New York City Became the Role Model for Other Urban Tech Hubs
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ABOUT US
ENDEAVOR is leading the global high-impact entrepreneurship movement to catalyze long-term
economic growth. Over the past fifteen years, Endeavor has selected, mentored, and accelerated the best high-impact entrepreneurs around the world. To date, Endeavor has screened more
than 30,000 entrepreneurs and selected 800+ individuals leading 500+ high-impact companies.
These entrepreneurs represent over 225,000 jobs and over $6 billion in revenues in 2012 and
inspired future generations to innovate and become entrepreneurs too.
ENDEAVOR INSIGHT, Endeavors research arm, studies high-impact entrepreneurs and their
contribution to job creation and economic growth. Its research educates policy makers and
practitioners on how to accelerate entrepreneurs success and support the development of
strong entrepreneurship ecosystems. In 2013, Endeavor Insight joined with the Kauffman Foundation and the World Bank to co-found the Global Entrepreneurship Research Network (GERN).
THE PARTNERSHIP FOR NEW YORK CITY engages the business community in efforts to
advance the economy of New York City and maintain the Citys position as the center of world
commerce, finance, and innovation. Through the New York City Investment Fund, the Partnership
contributes directly to projects that create jobs, improve economically distressed communities,
and stimulate new business creation.
Endeavor Insight
November 2014
Copyright Endeavor Global
www.endeavor.org/insight
/endeavorglobal
@endeavor_global
/endeavorglobal